Samsung Electronics has signed a $16.5 billion contract to manufacture artificial intelligence chips for Tesla, marking a significant boost for the South Korean company’s struggling foundry business.
The world’s largest memory chipmaker announced the deal in a regulatory filing on Monday, though it did not initially name the client. Tesla chief executive officer Elon Musk later confirmed the partnership on social media platform X, revealing that Samsung’s new Texas fabrication plant would be dedicated to producing Tesla’s next-generation AI6 chips.
“Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip. The strategic importance of this is hard to overstate,” Musk wrote on X.
The contract, running from July 2025 through to the end of 2033, represents 7.6 per cent of Samsung’s 2024 annual sales revenue and could provide a much-needed lifeline for the company’s loss-making foundry operations. Samsung currently holds just 8 per cent of the global foundry market, far behind industry leader Taiwan Semiconductor Manufacturing Company (TSMC), which commands a 67 per cent share.
Musk indicated the deal could be even larger than announced, stating: “The $16.5 billion number is just the bare minimum. Actual output is likely to be several times higher.”
The Tesla chief executive also revealed that Samsung had agreed to allow Tesla to assist in maximising manufacturing efficiency, adding: “This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house.”
Samsung’s shares jumped 6.8 per cent on Monday to their highest level since September 2024, whilst Tesla shares rose 1.9 per cent in pre-market trading.
The AI6 chips will be manufactured at Samsung’s $37bn Taylor facility in Texas, which is scheduled to begin operations in the second half of 2026. The plant had previously faced delays and struggled to secure major customers, with Samsung postponing equipment deliveries from Dutch manufacturer ASML in October due to a lack of significant orders.
Samsung currently produces Tesla’s AI4 chips, which power the electric vehicle maker’s Full Self-Driving driver assistant system. TSMC is set to manufacture Tesla’s AI5 chips, initially in Taiwan and subsequently in Arizona.
The deal comes as Samsung faces mounting pressure in the artificial intelligence chip market, where it trails competitors including TSMC and SK Hynix. The company projected a 56 per cent drop in second-quarter operating profit earlier this month, partly due to widening losses in its foundry business.
